Wednesday 21 November 2018

Dollar slides on Mnuchin remarks at Davos event

The US dollar hit new lows on Wednesday. Stock image
The US dollar hit new lows on Wednesday. Stock image

The US dollar hit new lows on Wednesday after US Treasury Secretary Steven Mnuchin said he welcomed its weakness and figures showed that the eurozone economy started the year at its strongest pace in over a decade.

Fear of protectionism from the US economy, the world's largest, had already pushed the greenback to a three-year low, but Mr Mnuchin's remark at the annual Davos summit of business and political leaders pushed it down further.

It was down half a percent against a basket of currencies in European trade.

Meanwhile, eurozone businesses enjoyed a much better start to 2018 than anyone polled by Reuters expected, ramping up activity at the fastest rate since the middle of 2006, a survey showed yesterday.

The euro touched a three-year high of $1.2356, the dollar fell below 110.00 yen for the first time since September and hit new three-year lows on a trade-weighted basis, while sterling was at its highest level against the greenback since the Brexit referendum vote in June 2016.

US President Donald Trump is due to speak tomorrow at the World Economic Forum in Davos, Switzerland, and investors are concerned he will use the speech to signal a more protectionist policy stance.

Mr Trump slapped steep tariffs on imported washing machines and solar panels on Monday, giving a boost to Whirlpool and dealing a setback to the renewable energy industry in the first of several potential trade restrictions.

Fresh signs of growth elsewhere in the developed world provided compelling alternatives for investors worried about the greenback.

Japan's exports to China and Asia hit record levels as shipments rose for a 13th straight month in December and manufacturing growth hit a four-year high in January, pointing to an economy that powered through the fourth quarter and into 2018.

The euro surge, meanwhile, comes ahead of Thursday's European Central Bank meeting, which is in focus following recent commentary that the central bank could change its policy guidance early this year.

"EURUSD is currently trading above 1.234, well above the 1.17-1.18 area that it traded at when the ECB last met last month," said John Moclair, Head of Global Customer Group, Bank of Ireland Global Markets.

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